Heart Device Manufacturer in Minnesota and Hospitals in Ohio and Kentucky to Pay Nearly $4 Million to Resolve Fraud Allegations

June 4, 2010 - WASHINGTON—St. Jude Medical Inc., a heart device manufacturer; Parma Community General Hospital; and Norton Healthcare have paid the United States $3,898,300 to resolve false claim allegations that St. Jude paid illegal kickbacks to two hospitals to secure heart-device business, the Justice Department announced today. The government alleges the kickbacks caused false claims to be submitted to federal health care programs in violation of the False Claims Act. The kickbacks included alleged rebates that were “retroactive” and paid based on a hospital’s previous purchases of St. Jude heart-device equipment and rebates that St. Jude paid for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude in the future.

Under the terms of the settlement, St. Jude, headquartered in St. Paul, Minn., will pay $3,725,000. Parma Community General Hospital, located in Parma, Ohio, is paying $40,000, and Norton Healthcare in Louisville, Ky., is paying $133,300. The government asserted that Parma and Norton were recipients of improper rebates from St. Jude.

“Hospitals should base their purchasing decisions on what is in the best interests of their patients,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will act aggressively to ensure that choices about health care are not tainted by illegal kickbacks.”

This action was initiated by the filing of an action under the False Claims Act by Jerry Hudson. Under the qui tam, or whistleblower, provisions of the Act, private citizens may bring lawsuits on behalf of the United States and share in any recovery. Mr. Hudson’s share of the settlement announced today will be $640,050.

“The Department of Justice is committed to requiring that federal healthcare monies are properly spent,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. “This case illustrates the necessity of oversight of federal health care programs in the United States.”

The settlement was the result of an investigation by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Ohio, the Office of Inspector General at the U.S. Department of Health and Human Services, and the FBI.

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $3.0 billion since January 2009 in cases involving fraud against federal health care programs.